Will ECB Increase the Interest Rate? As Portugal Finally Asking For the Bailout

Today the important event risk is expected on part of ECB, as may be we see step up for the increase in interest rate. But the big question is that weather ECB will do it or as not because finally Portugal Government requested for the bailout.

The Portuguese government has finally launched the request and called for international assistance late Wednesday, when the auction earlier in the day a 12-month bills produced by the average yield of 5.902% to 4.331% on the already high as the previous auction. Dos Santos, Minister of Finance said that the auction today make him depressed because the deterioration of the conditions in the market. Plus the rejection of the budget program, which caused the resignation of PM Socrates?

Prime Minister Socrates, who heads a transitional government before elections next June 05, said in a televised speech that he had requested the assistance of the European Commission following the recognition of the financial costs had become unbearable, I say today the Portuguese, as it is in our national interest to take action, “he said. The recent estimates figures show that Portugal probably need around 75 million Euros in aid. In response to the request for assistance, and efforts to help contain the spread affecting the European Commission Jose Barroso said Portugal’s application for aid “will be processed as quickly as possible”

ON Other Hand

The euro remains decently bid despite these latest developments as traders’ focus rests solely on the prospects of an ECB rate hike later in the day. Additionally, a Portuguese bailout has long been expected by the market which has carefully watched its access to credit deteriorate and credit rating be slashed to within a whisker of junk status. As such, while this news may not be affecting intraday trade today once today’s event risk is done and dusted and focus shifts back to the state of the euro-area periphery we are certain to see a significant reaction. Particularly at a time when many in the market are questioning the wisdom in an interest rate hike, certainly all would agree inflationary pressures are mounting but so are worries about the ability of the EMU, especially the weaker periphery nations, to handle higher interest rates.